'Deviant' management can turn a losing company into a winner

In 1997, Yellow Transportation landed in Fortune magazine's least-admired companies list. "We were a $2.5 billion company," says Greg Reid, senior vice president. "But we kept operating the same old way. Also we were losing money - huge, huge siphons of money." Desperate to yank Yellow from its rut, executives spent a year visiting customers, shadowing employees and talking, talking, talking. The solution? The company embraced "deviant leadership," a management style that encourages "thinking outside of the box, or saying there never was a box." By 2003, Yellow snagged the number-one spot in its industry on Fortune's most-admired companies list, and remained there in the 2004 and 2005 lists.

Every great company has a pivotal moment, a strategic juncture at which top management must decide to turn left or right, plunge forward or veer onto the bumpy verge. For Yellow Transportation, a trucking company based in Overland Park, Kan., it happened in 1997, when Fortune magazine included Yellow in its annual least-admired companies list.

"There we were, nicely sandwiched between TWA, which is now gone, and Kmart, which should be gone," jokes Greg Reid, senior vice president and chief marketing officer for Yellow-Roadway. Reid was speaking at the 14th Annual Frontiers In Services conference, co-hosted by the W. P. Carey School's Center for Services Leadership and the Center for Excellence in Service at the Robert H. Smith School of Business, University of Maryland. "Landing on that list was our chance to truly alter Yellow's fate: the moment you can point to later, the moment that change comes from."

Back when the feds deregulated trucking in the 1980s, Yellow was too hidebound to exploit new opportunities, instead continuing in the "less than truckload" freight shipping rut it had carved out for itself, he says. Labor relations with Yellow's 17,000-plus Teamsters were rocky. "We were a $2.5 billion company. But we kept operating the same old way," Reid continues. "Also we were losing money - huge, huge siphons of money."

Starting from scratch

Yellow's management style, typical of many American corporations, could best be described as a game of follow-the-leader, with senior execs in single file, mirroring the CEO's motions, he explains. In this scenario, nontraditional "ideas and attitudes are punished, and everyone is busy sorting out and weeding out those who don't think like company leaders." Desperate to yank Yellow from its rut, Reid and then Yellow President Bill Zollars spent a year visiting customers, shadowing employees and talking, talking, talking.

"Those silly customers had a different view of our performance," he recalls. "And in fact, research indicated that our shipments were picked up late, or damaged, or lost, or delivered wrong, or mis-billed 50 percent of the time. All they wanted was peace of mind. They wanted us to deliver on our promises."

So Reid and his cohorts decided to veer onto the bumpy verge, embracing "deviant leadership," a management style that encourages "thinking outside of the box, or saying there never was a box," he explains. Pretty soon Reid learned another lesson: that change is usually met with resistance — in this case, much of it from those "loveable, huggable Teamsters."

The management model Zollars and Reid pushed is best described as a motorboat towing a water skier. The water skier can slalom, take a few jumps, or sometimes just plow straight ahead. At the same time, the motorboat driver (representing top management) encourages the skier (representing employees) to take risks. "This is what deviant leaders do. This is the best model for changing a company's fate," he insists.

By 1998, with Reid's help, Yellow's creative types had distilled dozens of employee suggestions and customer complaints into a hilarious but intriguing nine-minute video depicting the new Yellow. The video opens with officious marketing experts yakking about the company's improved service, only to be interrupted by an exasperated customer who says, "Just pick up my stuff on time, and don't bust it." As the video continues, Yellow truckers are seen arriving on time, wearing snazzy uniforms, carrying handheld devices that track shipments and offering customers weekly performance reports.

Inspiration via video

"Change must be fun, it must be inspiring," Reid says. "We brought 1,200 managers to a central location to watch the video, to show them our vision plan and see if it translated into something inspiring to them." The video was a hit. Employees, including those "loveable, huggable Teamsters" embraced the vision plan. Yellow representatives fanned out with the company's new promise: guaranteed pickup on time and defect-free shipping or your money back.

A year later, Yellow made Fortune's list again, but this time as one of the fastest-ascending companies. By 2003, backed by a united work force and satisfied customers, Yellow snagged the number-one spot in its industry on Fortune's most-admired companies list, and remained there in the 2004 and 2005 lists.

It's a great Cinderella story, but how did a sluggish performer make such a dazzling turnaround? By focusing on nuts-and-bolts service, Reid says. For instance, a seemingly simple change in titles - from "product marketing" to "service marketing" — helped employees see their jobs as more customer-centric. Anyone who said "product" or "commodity" rather than "service" during management meetings had to put $1 in the conference-room jar (senior managers had to kick in $5 for slip-ups).

The new Yellow also "embraced as an asset" its considerable unionized labor force, jettisoning the time-honored distrust characterizing labor relations. "We found out during a workout session that our Teamsters have the same goals, to satisfy customers and do a good job," he adds.

Most importantly, Yellow leaders settled on a non-pecuniary "core purpose," a strategy Reid says "puts passion into an organization, so people are inspired to do great things. A core purpose is a goal always pursued and never fully reached that unites people." Companies with this orientation flourish, he argues, pointing to Mary Kay Inc., a $1.8 billion firm; the Walt Disney Co., with revenue of $30.8 billion and Wal-Mart Stores Inc., worth $285 billion.

"Mary Kay's core purpose was to give women opportunities to earn money. Her company is responsible for creating more female millionaires than any other. Walt Disney's core purpose was to make people happy. Wal-Mart's founder said he wanted to give poor people the opportunity to buy the same things as rich people," Reid explains.

Yellow's core purpose, posted front and center on its Web page, is "making global commerce work by connecting people, places and information." If revenue is an indicator, it's done the trick: Yellow has reported just under $6.8 billion in its Securities and Exchange Commission filing for fiscal 2004.

Today, when asked for advice on growing a business, Reid has a succinct message: "Be deviant enough to let people do great things."